Pentagon agency seeking $306,000 in overcharges

WASHINGTON—The Defense Logistics Agency told Congress on Thursday that it had been overcharged for common kitchen equipment under its prime vendor purchasing system and that it would seek new bids for more than $800 million worth of purchases.

The agency, which buys equipment and supplies for the U.S. military, said it also would ask five suppliers to return $306,000 in overcharges for equipment such as refrigerators and coffee makers.

The agency also won't renew $120 million worth of contracts with those five suppliers when they expire in June. Instead, it will solicit new bids in open competition.

Contracts worth $714 million more for items such as firefighting equipment and wooden pallets also will be rebid.

Agency officials outlined the actions during a briefing to members of the House Armed Services Committee, which ordered the agency to review its prime vendor purchasing program after a Knight Ridder investigation found that the agency had been overcharged for kitchen items.

Knight Ridder reported that the agency paid $32,642 for an airplane refrigerator that the manufacturer sells for $17,267 each, $20 for ice cube trays that cost 89 cents, and $81 for coffee makers that usually sell for $29.

"There are many of us on the House Armed Services Committee that do not think that the prime vendor program has worked to the benefit of the taxpayers, and that's why those changes are forthcoming," said Rep. Walter Jones, R-N.C. "This is a small victory, but a victory for the taxpayers."

"I am glad that the military has finally gotten to the bottom of this matter," said Rep. John Spratt, D-S.C. "This proves the value of congressional oversight and the value of good journalism as well."

Congressional aides said agency officials told the committee that a contracting officer and supervisor have been reassigned as a result of the internal review, that another person has resigned and that four people have had their authority to purchase items for the government revoked.

"That's a death knell for a contracting officer," said one committee aide.

Another congressional aide said that a criminal investigation by the Pentagon is pending. The Government Accountability Office is scheduled to complete its audit of the prime vendor program by the end of April, the second aide said.

Both aides asked not to be quoted by name because they weren't authorized to speak on the subject.

The Defense Logistics Agency buys nearly all of the military's consumable items, from groceries to jet fuel. The agency also disposes of materials and equipment the military no longer needs.

The agency provided more than $31 billion in goods and services last year to U.S. armed forces, including those in Afghanistan and Iraq. The agency was created in 1961 and is based at Fort Belvoir, Va. It employs more than 21,000 civilians and military personnel in nearly every state and 28 foreign countries.

The Defense Logistics Agency's prime vendor program was set up in 1992, partly in response to news reports on wasteful Pentagon spending in the 1980s.

The program was meant to save the Pentagon money by allowing bulk purchases and limiting suppliers to a relative handful of firms. It also was meant to cut down on expensive warehouse space and speed up delivery of items to troops in the field.

Jack L. Hooper, chief of media relations at the agency, said he couldn't comment on the House briefing or any changes that the agency was making because they're "still under active discussion between the department and its committees of jurisdiction."

The companies that were listed by the House committee for overcharging the government were Dietary Equipment Co., of Columbia, S.C.; Lankford SYSCO, of Pocomoke City, Md.; JAL Enterprises, of Hampton, Va.; FEM Food Equipment Marketing Inc., of Rockville, Md., and Gill Marketing Co., of Phoenix

Between them, the five companies were responsible for providing kitchen equipment to U.S. military dining halls and shipboard galleys worldwide. Their five-year contracts ranged from $12 million to $30 million each.

No one at those companies was available for comment Thursday. It's unclear whether they'll be allowed to bid when new contracts are solicited after the current ones expire.